Gutted cars, shattered glass and smashed paving stones littered Budapest's Freedom Square today after protesters stormed the headquarters of Hungarian state television to demand the resignation of the prime minister.

Hundreds of people, most of them young men, burst though police lines to attack the station, having broken away from a much larger, peaceful demonstration against the country's Socialist leader Ferenc Gyurcsany, who admitted to lying to the nation about the state of the economy to retain power.

The rightwing Fidesz opposition party said it would boycott parliament today and added its voice to demands for Mr Gyurcsany to resign, while analysts said they believed the media-savvy prime minister may have sanctioned the leaking of the tape himself in order to demonstrate his determination to push through unpalatable reforms.

Mr Gyurcsany, who emerged from the communist youth movement to become one of Hungary's richest men during the privatisations of the 1990s, denounced the violence.

"The street is not a solution, but instead causes conflict and crisis," he said today. "Our job is to resolve the conflict and prevent a crisis."

However, he rejected the calls to step down.

"I had spent three minutes on Sunday night thinking about whether I should step down or whether I had a reason to step down, and the conclusion I came to is that absolutely not," Mr Gyurcsany, 44, told Reuters.

About 150 people were injured in Hungary's worst violence since the fall of communism, as police used tear gas and water cannon to disperse the demonstrators. Despite this dozens managed to break into the television station.

Broadcasting officials said that offices and studios were ransacked before police finally broke the crowd up, leaving emergency workers to douse several blazing cars and clear up the square.

Mr Gyurcsany was caught on tape telling party colleagues that the government had lied to the public and made countless mistakes during its first term in office.

On a leaked recording of a party meeting in May, a month after his government won a second term in office, Mr Gyurcsany said only "divine providence, an abundance of cash in the world economy and hundreds of tricks" had kept Hungary's economy afloat as it laboured under the largest per-capita deficit in the European Union.

"We lied in the morning, and we lied in the evening," he told the meeting in a 25-minute speech that was peppered with obscenities and in which he said the government's failure to overhaul the economy had made painful reforms inevitable.

"There is not much choice, because we screwed up. Not a little, a lot. No European country has done something as bone-headed as we have," he said. "Evidently, we lied throughout the last year and a half, two years.

"You can't show me any significant government measure that we can be proud of, other than, in the end, we managed to drag the government back from the brink."

Mr Gyurcsany took control of the Socialists in 2004, when polls showed them trailing far behind Fidesz. He reversed the slide in popularity to make his government the first to win re-election since the end of communism in 1989. However he admitted that to secure a second term he obscured the real size of the budget deficit and backed imprudent tax cuts.

The government now hopes to limit the 2006 budget deficit to 10.1% of GDP rather than its pre-election target of 4.7%, and has announced major spending and employment cuts - as well as higher taxes and direct fees for health services and university tuition - that are deeply unpopular.

Such is Mr Gyurcsany's reputation as a slick media operator that many analysts believe he may have sanctioned the leaking of the tape in order to demonstrate his determination to push through unpalatable reforms and clean up politics.

"The real issue in Hungarian politics today is not who lied and when, but who is able to put an end to this, who can face up to the lies and half-truths of the past 16 years," Mr Gyurcsany wrote on his blog (Hungarian), alongside a transcript of his May party address.

"The lies are the sins of the whole Hungarian political elite," he added, insisting that he was proud of his "passionate speech".

But Fidesz and other opposition parties are adamant he should step down. "This is an unprecedented crisis in the history of Hungarian democracy and Ferenc Gyurcsany is not part of the solution but the problem," said a senior Fidesz member, Tibor Navracsics. "He is now persona non grata in Hungarian politics."

Fidesz has vowed to boycott parliament today and looks set to prosper in next month's local elections, to be held just before the 50th anniversary of Hungary's October 1956 uprising against communist rule.

Last night's protests carried an echo of the 1956 revolt, during which students besieged the main radio station in Budapest to demand their grievances be read out on air.

Some of the protesters last night chanted nationalist slogans and waved flags with red and white "Arpad stripes", a centuries-old Hungarian symbol named after the founder of the country's first royal dynasty. Rioters also vandalised a large obelisk commemorating Soviet soldiers who were killed driving Nazi forces from Hungary at the end of the second world war.